Advanced Placement (AP), 23.04.2021 17:40 pineappleliyah3

Assume that the United States economy is currently operating at an equilibrium below full employment. a. Draw a correctly labeled graph of aggregate demand and aggregate supply, and show each of the following.

i. Long-run aggregate supply

ii. Current equilibrium output and price level

b. Now assume a significant increase in the world price of oil, a major production input for the United States. Show on your graph in part (a) how the increase in the oil price affects each of the following in the short run.

i. Short-run aggregate supply

ii. Real output and price level

c. Given your answer in part (b), explain what will happen to unemployment in the United States in the short run.

d. Assume that the United States trades with Japan. Draw a correctly labeled graph of the foreign exchange market for the United States dollar. Based on your indicated change in real output in part (b), show and explain how the supply of the United States dollar will be affected in the foreign exchange market.

e. Given your answer in part (d), indicate what will happen to the value of the United States dollar relative to the Japanese yen.

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Assume that the United States economy is currently operating at an equilibrium below full employment...

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